A supply chain is a network of facilities and distribution options that performs the functions of procuring materials, transforming the materials into semi-finished and finished products, and distributing the finished products to customers. Supply chain management (SCM) is a business policy that aims to improve all activities along the supply chain. SCM results in improved integration and visibility within individual companies, as well as flexibility across supply and demand environments.
Product manufacturers strive to maximize profits by charging the greatest price possible for the product, and by optimally matching the supply of products to the demand. However, real world issues often combine to present problems that must be overcome in order to maximize profits. For example, certain types of products, such as computers and fashion items, lose value over time. In addition, supply chain capacity is typically flexible only within certain bounds. Further, customer or product segmentation potential varies by industry. Moreover, a manufacturers' share of variable costs is higher than that of service industries, product demand may be variable, and contracts may limit price adjustments.
SAP AG and SAP America, Inc. provide supply chain management solutions for product manufacturers to help them reach their goals. Some of the solutions are based on the mySAP.com e-business platform (see sap.com for further information). One of the building blocks of the e-business platform is the SAP R/3 component that provides enterprise resource planning functionality. The SAP R/3 product includes a Web Application Server (“Web AS”), an R/3 core, and various R/3 extensions.
The SCM Extensions of R/3 deal with various planning, coordination, execution, and optimization issues that are associated with a supply chain. It would be beneficial to provide a web-based or on-line system that optimizes the alignment of variable customer demand and existing supply capabilities to optimize profits.